Frontier Airlines 2005 Annual Report Download - page 23

The Delta Code-Share Agreements
As of December 31, 2005, we operated 15 ERJ-135 aircraft and 24 ERJ-145 aircraft, including two spares, for Delta under a fixed-fee
code-share agreement. As of December 31, 2005, we provided 258 flights per day as Delta Connection between Cincinnati, Orlando
and Fort Lauderdale and designated outlying cities. In connection with a marketing agreement among Delta, Continental Airlines and
Northwest Airlines, certain of the routes that we fly using Delta's flight designator code are also flown under Continental's or
Northwest's designator codes.
In January 2005, we entered into a fixed-fee code-share agreement with Delta to operate 16 ERJ-170 aircraft on terms
substantially similar to those of the code-share agreement between Chautauqua and Delta. As of December 31, 2005, we operated nine
ERJ-170 aircraft.
The code-share agreements for the ERJ-135/145 and ERJ-170 regional jets terminate in May 2016 and January 2019,
respectively. Delta may terminate the code-share agreements at any time, with or without cause, if it provides us 180 days written
notice, provided that such notice shall not be given prior to 2009 for the ERJ-135/145 regional jet agreement and 2013 for the
ERJ-170 regional jet agreement..
Delta provides us with reservation services, baggage handling and other ground support, tickets and similar items with respect to the
flights we operate for them and Delta controls scheduling, ticket prices and seat inventories with respect to such flights. In exchange
for providing the designated number of flights and performing our other obligations under the code-share agreement, we receive from
Delta monthly compensation made up of a fixed-fee per block hour, a fixed-fee per flight hour, a fixed-fee per departure, a fixed-fee
per scheduled aircraft per day and a fixed-fee per day. The fixed rates that we receive from Delta for a given month may be increased
if we achieve a specified flight completion rate in that month. We are eligible to receive additional compensation based upon our
actual completion rate and on-time arrival rate for each month. Further, for each semi-annual period during the term of the agreement,
we are eligible to receive additional compensation from Delta.
Certain of our operating costs are considered "pass through" costs, whereby Delta has agreed to reimburse us the actual amount of
costs we incur for these items. Fuel, engine maintenance expenses, landing fees, passenger liability insurance, hull insurance, war risk
insurance, de-icing costs, and aircraft property taxes are some of the pass through costs. Aircraft rent/ownership expenses are also
considered a pass through cost, but the reimbursement is limited to specified amounts for certain aircraft.
The fixed rates payable to us by Delta under the code-share agreement have been determined through the term of the code-share
agreement and are subject to annual escalation. Certain costs, including fuel costs, aircraft ownership and financing costs (subject to
limitation), landing fees, property and liability insurance, aircraft property taxes and de-icing costs, are adjusted on a monthly basis for
differences between the actual costs and the assumed costs. In the event we are unable to operate the aircraft due to a strike, labor
dispute, work stoppage or similar event, that is substantially within our control, or caused by some action or inaction by us or relates to
the aircraft we operate for Delta, Delta is not obligated to pay us pursuant to the code-share agreement. However, if we cannot operate
the aircraft due to a strike, labor dispute, work stoppage or similar event that is substantially within the control of Delta, or caused by
some action or inaction by Delta, Delta shall still be obligated to pay us the fixed amounts due under the agreement, plus monthly and
semi-annual incentive payments if we achieve certain milestones. If we cannot operate the aircraft due to an event that is not
substantially within the control of either us or Delta, or caused by some action or inaction of either us or Delta, Delta is only obligated
to pay us our fixed costs and our pass through costs during the period in which we cannot operate the flights for Delta.
Under the terms of the code-share agreement, except for (1) the aircraft we currently operate for US Airways and American, (2) the
additional aircraft allocated to US Airways and American under our existing code-share agreements and (3) other limited exceptions,
we have agreed to list its flights only under Delta's code during the term of our code-share agreement with them unless we obtain prior
written approval from Delta. Delta granted written approval of our entry into a code-share agreement with United in February 2004. If
we enter into a new code-share agreement with Delta's permission, we remain prohibited from operating any aircraft for the new
code-share partner into or out of several major metropolitan airports. During the term of the code-share agreement, we may not
operate any flights under our own flight designator code into or out of several major metropolitan airports unless that flight is flown
under its code for one of our existing code-share partners and that partner remains obligated to compensate us for operating that flight.
Pursuant to the terms of the code-share agreement, Delta has the right, prior to the entrance by us into an agreement with a third party
to operate aircraft that we previously operated for another existing code-share party for that third party or for us, to purchase, lease or
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 27, 2006 Powered by Morningstar® Document Research℠